wjr business beat

WJR Business Beat: Consumer Credit Card Spending Increasing (Episode 322)

On the Business Beat, Jeff Sloan discusses how increased consumer credit card usage may signal trouble ahead.

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Good morning, Paul! The good news this morning, U.S. consumers are spending more and that’s great for retailers and other businesses who need that increased spend desperately. However, the concerning news? It now is clear that an increased amount of that spending is being driven by consumer credit card usage and the trend signals a market change from how consumers use their credit cards during the COVID-19 crisis when they actually scaled back spending and substantially paid down debt. Now, during the pandemic household supported by direct cash payments and forbearance programs largely reduce their credit card debt. But now with forbearance programs winding down, some of those consumers may be using some of their available credit to make ends meet. And this is driving those credit balances up. Now the Federal Reserve of New York’s Center for Microeconomic Data recently issued its quarterly report on household debt and credit. And the report shows the total household debt increased by $286 billion in the third quarter of 2021. The total debt balance now is $1.1 trillion higher than it was at the end of 2019 for U.S households. It is also $890 billion higher than Q3 2020. What does all of this mean? Well, it certainly appears as though credit card use is ramping up and it’s returning to pre-pandemic levels, the researcher said. As pandemic relief efforts wind down, we are beginning to see the reversal as some of the credit card balance trends seen during the pandemic, namely reduced consumption and paying down of balances, Dung Hoon Lee, a research officer at the New York Fed said in his statement. He went on to say at the same time, as pandemic restrictions are lifted and consumption normalizes, credit card usage and balances are resuming their pre-pandemic trends. Now all the findings showed that credit balances are increasing that delinquencies fortunately remained low, at least for now. Thanks in part to forbearance programs and other federal aid. Now is this a short-term increase in credit usage or is it a harbinger of tougher economic times confronting us now and even into the future? We’ll be keeping an eye on this, Paul, and we’ll continue to report on the trends as we get more information. I’m Jeff Sloan, founder and CEO of startupnation.com, and that’s today’s Business Beat on the Great Voice of the Great Lakes, WJR.

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